This paper examines the impact of electronic trading systems on the bid-ask spreads in the foreign exchange market. The paper finds: first, the EBS reduces spreads significantly; second, the EBS is more influential than the Reuters system for the currency pair DEM/USD; third, dealers with...

Many studies have shown that the correlation of stock portfolio returns is higher during market downturns, while very few of them offer an explanation for the causes of such an asymmetry. This article examines potential fundamental causes for the phenomenon. We find that such an asymmetry is...

This paper examines the day-of-the-week effect for the forward premium puzzle. The paper finds that Thursday consistently appears to be a special day on which the deviation from the unbiasedness hypothesis is much less compared to other weekdays across currencies. In addition to Thursday, Monday...

This paper analyzes the volatility linkage across the U.S., European, German, Japanese, and Swiss equity markets from 1999 to 2009. Both the unconditional and conditional correlations exhibit large fluctuations during the sample period. The results from the VAR analysis show an asymmetric...

This paper uses the multivariate stochastic volatility (MSV) and the multivariate GARCH (MGARCH) models to investigate the volatility interactions between the oil market and the foreign exchange (FX) market, in an attempt to extract information intertwined in the two for better volatility...

We examine market linkage and information spillover across the U.S. stock, corporate bond, and credit derivatives markets in the pre-crisis, crisis, and recovery periods. Our results suggest that information spills over across markets in a timely manner. We find that the market linkage becomes...

This paper explains exchange rate dynamics by linking financial customers’ foreign exchange order flow with their dynamic portfolio reallocation. For any currency pair in a particular period, one currency has higher assets return than the other and can be considered the high-return-currency...

This paper tests the forward premium puzzle in a wide range of maturities from 1-day to 5-year. It finds that the forward premium puzzle appears to be most significant for medium maturities, while disappearing for both very short and long maturities.

This article examines how differently the same dealer quotes in the inter-dealer and customer foreign exchange markets that have different market structures. The model first predicts that customer spreads are generally wider than inter-dealer ones due to less transparency in the customer market....

This article empirically examines the relationship between order sizes and spreads in the foreign exchange (FX) market based on a FX dealer's quotes. It is found that spreads are independent of order sizes in the inter-dealer market, but they are negatively correlated in the customer market....